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. Last Updated: 07/27/2016

FESCO Vote Leaves Foreigners Stunned




Primorye region Governor Yevgeny Nazdratenko won the latest round of a battle with foreign investors when his man was elected Tuesday as chairman of the board at the Far Eastern Shipping Co.


A FESCO board meeting in Vladivostok tapped Deputy Transport Minister Alexander Lugovets as its chairman, said representatives for foreign shareholders in the firm.


Nazdratenko was unavailable for comment Tuesday, as was Lugovets.


The decision stunned foreign and Russian minority shareholders in FESCO, who between them had been represented by six members of the 11-member FESCO board.


However, one of those six, Richard Thomas, voted with Nazdratenko and against the wishes of the shareholders he officially represented, said Andrew Fox, chairman of Tiger Securities, an investment firm that represents foreign shareholders and for whom Thomas worked.


"One of our people was persuaded to vote for them," Fox told The Moscow Times in a telephone interview from London.


With the other five FESCO board members solidly behind Nazdratenko, the outside investors were doomed when Thomas defected under pressure from the governor, Fox said.


"I believe that he was seriously threatened [by the local administration]. We spoke every day, and I knew that he had a serious problem, and he felt that he had no choice."


Fox said his company had suggested that Thomas leave Vladivostok before the board meeting, but he declined.


Thomas is a 47-year-old U.S. citizen who has a Russian wife and a 5-year-old daughter. He holds a Russian resident's permit and therefore is dependent on the goodwill of the local administration should he wish to leave Russia, Fox said.


There was no answer at Thomas' telephone number in Vladivostok on Tuesday night.


He had worked at Tiger Securities for four years, but left the firm Tuesday after the board meeting, Fox said.


Fox also protested the recent decision of FESCO subsidiary FESInvest to sell a 5.2 percent stake in FESCO to the federal government for 21 million rubles ($860,000), giving the state a blocking stake of more than 25 percent."We protest against this sale, of course, and we think this sale should be canceled," Fox said Tuesday. "The price is too low - it would value the company at about $16 million only."


FESCO, the biggest shipping company in Russia with 112 ships, has net assets of about $500 million, and its 1998 turnover was $350 million.


However, the company has a heavy debt burden of more than $144 million, Fox said.


Nazdratenko has been fighting a fierce public battle against Fox - and the foreign shareholders he represents - and Partnerstvo Investments, a Moscow-based firm. The foreign shareholders hold 42 percent of FESCO and Partnerstvo holds 6.1 percent. Between them the outside investors had succeeded in getting six board members elected at the company's May 21 annual general meeting.


The conflict between the shareholders and Nazdratenko became public in mid-June when Fox alleged that the Primorye region boss, flanked by the local security and police chiefs, had threatened him with an indefinite stay in jail.


Fox, who was also Honorary British High Consul for Vladivostok, said the governor demanded that the foreigners Fox represents hand over a 7 percent stake in FESCO for the Primorye region to hold in trust and that Fox should vote for Nazdratenko's candidate for board chairman.


Nazdratenko denied threatening the British businessman and countered that Fox was acting on the behest of foreign powers and claimed that he and the other outside investors would strip FESCO of assets and wreck it.


Fox said Tuesday he is confident that an extraordinary shareholders meeting will overturn the results of Tuesday's board meeting, but that the process will take some time.